Using the constant-growth method for our Dividend Discount Model (DDM), find the intrinsic value of a share of Walt Disney Company stock.To do so, enter DIS in the "Quote" box of the CNBC site.You will need to find the most recent annual dividend and beta (use 5-year beta). You may assume that Disney's growth rate in dividends and earnings is 9%.

For the appropriate discount rate (k), you will need to compute the required rate of return on Disney using the Security Market Line (SML) of the CAPM.So, you need to find the risk-free rate of return (use the Yield to Maturity of the 30-year T-Bond) and you may assume that the expected return on the market for the next period is 10%.

1. What is Disney's required rate of return according to the SML of the CAPM?
2. What is the intrinsic value of a share of Disney stock according to the DDM?
3. Currently, is Disney's stock price overvalued or undervalued?
4. Suppose that the expected return on the market portfolio is 11% (rather than 10%).What is our new valuation?
5. According to the value calculated in above question, is the stock price in the market currently overvalued or undervalued?
6. Suppose that Disney's growth rate in dividends turns out to be a constant 8% (rather than 9%).Using the original 10% expected return on the market, what is the new valuation?
7. According to the value calculated above, is the stock price currently overvalued or undervalued?
8. According to the calculated values above, what can we conclude will happen to our valuation following an increase in the expected return on the market?
9. According to the calculated values above, what can we conclude will happen to the intrinsic value following a decrease in the expected growth rate in dividends?
10. Based upon the valuations above, what might we be able to conclude about the validity of the Dividend Discount Model (DDM)?